The Shanghai Stock Exchange encountered a breakdown in its system amidst a surge in trading activities. The trading frenzy that swept through China in late September and early October shed light on the inadequacies of the Shanghai Stock Exchange (SSE) and the securities firms in the country. The outdated systems struggled to cope with the overwhelming volume of trades spurred by government announcements of economic stimulus.

On September 27, glitches and delays plagued the SSE’s trading systems, leading to crashes in brokerages’ trading software, causing frustration among investors who suffered losses. This trading frenzy was ignited by a Politburo meeting the day before, promising additional monetary and fiscal support to boost the slowing economic growth. Preceding this, a briefing by the central bank and financial regulators on September 24 had already set off a surge in trading activities, aiming to prop up the stock and property markets.

As the SSE and brokerages endeavored to stress-test and enhance their systems during a public holiday starting on October 1, challenges persisted. The trading volume exceeded 1 trillion yuan within the first 20 minutes of the market opening on October 8, despite returning to normal levels later. This incident underscored the vulnerabilities of the technological infrastructure within the sector.

The country aims to transition its financial systems to domestic technologies by 2027 under the “xinchuang” strategy for technological independence. However, the compatibility issues between old and new systems pose significant obstacles. Efforts are ongoing to bridge the gaps in product capabilities and technical maturity between the existing systems and the xinchuang initiative.

Unlike the Shanghai Stock Exchange, the Shenzhen Stock Exchange did not face similar disruptions as it had adopted a modern trading system in 2016 based on open-source technologies. Experts suspect that software errors or compatibility issues may have been at the core of the SSE’s challenges. The introduction of new domestic hardware that does not seamlessly integrate with the older systems could lead to gradual issues arising, particularly as some xinchuang software solutions are relatively nascent and lack maturity.

To address these challenges, the SSE has allocated major technology projects to domestic firms such as Digital China Advanced Systems Services and Hundsun Technologies. Securities companies are now striving to enhance their system capacity to prepare for potential future surges in trading activities while grappling with resource limitations and human resource constraints in attracting top IT talent due to industry-wide salary reductions and competition from major internet companies.

One proposed solution involves the utilization of cloud services that can adjust computing resources dynamically based on trading demands. However, concerns over data security and control have made the industry cautious about fully embracing cloud services for core trading systems. The preference remains for maintaining control over data centers to comply with regulatory standards.